Germany reacts cautiously to Hollande's Europe plan

Germany said Friday that French President Francois Hollande's proposal for a eurozone economic government was "interesting" but reacted cooly to his call for strengthened European budgetary powers.

"Such a right to a budget could result in the mutualisation of debt. You know the position of the government on that, that such a mutualisation of debt is out of the question," a German economy ministry spokesman said.

Additionally the powers of Germany's Bundestag lower house of parliament would be affected by the budget proposal, he told a regular government news conference, warning that "caution" was needed.

Several eurozone powers including France and the European Commission have called in the past for the 17 member-bloc to pool its debts in response to the debt crisis that has buffeted the currency zone.

But powerhouse Germany has been against it as an immediate crisis-fighting tool, fearing weaker eurozone members would get a free ride at its expense.

A year into his presidency, Hollande vowed Thursday to push for a new eurozone government as he struggles to overcome France's economic woes amid rising unemployment and recession.

He proposed a four-pronged approach for overhauling Europe, including the creation of an "economic government" that would have a president, meet every month and be equipped with a budget.

Chancellor Angela Merkel's spokesman Steffen Seibert called Hollande's broad proposal "interesting and worthy of consideration" and said Merkel and Hollande had discussed it "quite some time ago".

But he told the same briefing: "For us it's important that we first work on the more immediate steps. That means that we agree on what the conditions are for better competitiveness."

The next opportunity for that discussion would be at a June EU summit, he said.

He also denied a pre-released report Friday by the Spiegel news weekly that Germany and France would not present a common statement on the euro crisis before the June summit, as planned, because of differences.

"Such a decision has not been made," Seibert told reporters, adding that Berlin was working with Paris "closely and in mutual trust" on the EU and eurozone's further development.

Merkel told a panel on Europe in Berlin Thursday that she had a "good" relationship with Hollande but that did not mean they did not sometimes have differences on an issue.

Friction has arisen between the neighbours recently as Berlin stresses the need for belt-tightening to make growth sustainable while Paris believes higher public spending can kick-start struggling eurozone economies.